12% CONVERTIBLE NOTE DUE ON DEMAND OF HOLDER

THE SECURITIES REPRESENTED BY OR ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO THEIR DISTRIBUTION AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THIS COMPANY, AN EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER THE SECURITIES LAWS.

Rubber Research Elastomerics, Inc., a Minnesota corporation (the “ Company ”) for value received, hereby promises to pay to the order of Riviera Investments, Inc. or any assignee thereof (such payee, or in the event of such assignment, the last such assignee hereinafter referred to as the “ holder ”), the principal sum of $300,000.00 , or so much thereof as the holder demands in writing, immediately upon written demand of the holder, with interest on the unpaid balance of such principal amount accrued from October 1, 2007 at an annual rate of twelve (12%) , calculated on the basis of a 365-day year, such interest payable quarterly on the first day of each calendar quarter, commencing January 1, 2008.  Payments of principal and interest shall be made in lawful money of the United States of America at the principal office of the Company in Minneapolis, Minnesota, or at such other place as the Company shall have designated for such purpose to the holder in writing.

1.            Conversion .

The unpaid principal amount of this Note and accrued but unpaid interest thereon is convertible at the option of the holder during the period from the date of issue hereof through the date of repayment into shares of 8.5% Convertible Preferred Stock of the Company (“ Preferred Stock ”) at a conversion price of forty-two cents ($0.42) per share.  The number of shares into which the Note is convertible shall be appropriately adjusted to reflect stock dividends, stock splits and the like.  The conversion price is herein called the “ Conversion Price .”

If the Company proposes to repay this Note in whole or in part, other than pursuant to written demand of the holder, it shall give the holder written notice of such proposed repayment not less than thirty (30) calendar days prior to the intended date of repayment, and the holder shall have the right to convert the unpaid principal amount of this Note and accrued but unpaid interest thereon into Preferred Stock pursuant to this Section 1 at any time on or before the intended date of repayment.

The Company shall not be required to issue any fraction of a share of Preferred Stock or scrip representing a fraction of a share of Preferred Stock on any conversion pursuant to the terms of this Note.  Upon the surrender to the Company of the Note for conversion, the holder shall be entitled to receive the number of full shares of Preferred Stock equal to the quotient (exclusive of fractions) obtained by dividing the amount due of the Note so surrendered, by the Conversion Price, and an amount in cash, as an adjustment in lieu of any fraction of share resulting from such division, equal to such fraction multiplied by the Conversion Price of one share.

To convert the Note into shares of Preferred Stock, the Note shall be surrendered to the Company at its principal office or at such other office or agency as the Company may authorize for such purpose, endorsed or accompanied by a written instrument of surrender in form satisfactory to the Company, duly executed by the holder or his attorney duly authorized in writing.  Partial conversion of the Note is authorized.

The Company shall issue and deliver in exchange for that portion of the Note so surrendered for conversion, as soon as practicable after such surrender, certificates representing the number of shares of Preferred Stock into which such Note shall be convertible, issued in the name of the holder or in such name or names as the holder may direct.  The conversion right in respect of the Note shall be deemed to be exercised upon the receipt by the Company of the Note so surrendered duly endorsed or accompanied by a written instrument as above provided.  The holder of the Note shall be deemed to have become a shareholder of record as of the date upon which the Note shall have been so received, provided the requirements hereof are complied with.  Thereupon, that portion of the Note with respect to which the conversion right is exercised shall be deemed to be satisfied and discharged and no longer outstanding for any purpose.  The receipt of the Note so surrendered shall constitute full payment for the shares issued in conversion thereof.

If at anytime while this Note is outstanding the Company shall consolidate with or merge into another corporation, the holder hereof shall thereafter be entitled upon conversion to the issuance of, with respect to each share of Preferred Stock issuable upon conversion of this Note immediately prior to the date upon which such consolidation or merger shall become effective, the securities or property to which a holder of one share of Preferred Stock would have been entitled upon such consolidation or merger, without any change in, or payment in addition to, the Conve